What the Bancrofts Owe Dow Jones

In return for a century of dividends, a "no" and a graceful exit

It’s on the Bancrofts now. That hard-bargaining Dow Jones & Co. board has agreed to sell the Bancroft’s patrimony for 60 pieces of silver and a piece of paper that says Rupert Murdoch won’t ruin the The Wall Street Journal.

This comes after a DJ special committee swung and missed in an attempt to squeeze an extra nickel out of Murdoch, who toyed with its members like so many stuffed koala bears. Hey, The Audit could have gotten what the man offered.

But, at least the DJ committee made him sweat, as the Journal reports:

Over a lunch of chicken breasts and salmon in a small corporate dining room, Mr. Murdoch looked confident and relaxed after attending a summit of media executives in Idaho last week, according to people familiar with the meeting.

This ees brutahl! Anothah Fostah’s, plaayes?

I love this bit. Note the language:

Mr. Murdoch listened to the directors’ pleas but told them “it was hard enough to get my board to $60,” according to a person familiar with the discussion.

“Directors’ pleas.” Nice. What’s the argument for a higher price, exactly? The Bancrofts’ conscience?

If this were a movie, only the Marx Brothers could do it justice. Margaret Dumont would play one of the Bancrofts. Groucho would play Michael Elefante, Bancroft family lawyer/Bancroft trustee/Dow Jones director, or, as I like to call him, Dow Jones’s everything bagel. Harpo would play Dow Jones CEO Rich Zannino.

Dumont: “We simply cannot—nay, we must not—sell Barney Kilgore’s legacy and our good name for $60 a share.

Groucho (rolling eyes, flicking cigar): “Can you make it $65?”

Harpo: “Honk!”

And how about the image of Murdoch working hard “to get” fellow News Corp. directors “to $60.”

K. Rupert Murdoch: “But, plaaihyes. Ah nayed $60 for this dayle!”

Lachlan Murdoch: “$59 ‘n nah a haypennay mo’, dad! “

I mean, seriously.

So now we are down to brass tacks. I think the Bancrofts are going to say yes.

But many holders of supervoting shares, including longtime director and executive Jim Ottaway and several outspoken Bancrofts, realize what’s at stake and will vote no. Here’s why the rest should, too.

For one thing, the Bancroft familiy has taken more than $500 million in dividends out of the company since 1987, which is as far back as DJ’s dividend history goes on the company’s website (and don’t even try to do this on Factiva, DJ’s costly financial news and data provider; you’ll sprain something.) Divided by 36 Bancrofts, that’s about $14 million each. For doing nothing.

And the Bancrofts have owned the company since 1902, so the family has done very well for a long time. And let’s remember, these aren’t Dows or Joneses. They’re not even really Barronses. They are the descendents of the eldest daughter of Jessie Waldron, the wife of Clarence Barron, who bought the company in 1902. She had two children by another marriage.

Still unclear to The Audit:

1. Who was Mr. Waldron?

2. What did Martha Waldron Barron do to get cut out of the will?

3. Did it have anything to do with her marriage to that bounder Wendell Endicott (1)?

Point is, these people, as public spirited as they may be, have for years been collecting what their favorite editorial page, if it were honest, would call an entitlement, something slightly less offensive than providing health care to children. Most Bancrofts have added less value to the company than I did (2).

True, they could have risked their capital elsewhere. But what did they do, really, to earn it in the first place? Now, we all wish they had put their money elsewhere. They could have gotten the 2.5% dividend from a money market account. There’s no prestige with that, true, but no responsibility, either.

Second, this is all basically their fault. In retrospect, we now see that the $900 million writedown in 1997 of failed data-provider Telerate was a defining moment that required leadership. Looking back, we know that only a radical change direction, including a change in senior management, could have saved the company while there was still time. And 10 years is actually a fairly long time. Look what former newspaper publisher and data-provider Thomsom Corp. has done compared to DJ in five (Factiva doesn’t go back 10 years. Try Bloomberg. P.S. Ignore the spike in DJ shares caused by the News Corp. offer).

That was one time to exercise the power, and the responsibility, that comes with those Class B shares. Removing former Chairman and CEO Peter Kann, cutting the dividend and increasing leverage would have given the company a fighting chance.

But, that’s in retrospect. it is hard to know what to do in real time, though some Bancrofts and many people on Wall Street did voice concern back then. But, again, that’s all money under Bridge.(3)

Having said all that, the Bancrofts’ hearts are in the right place. As they said during this deal and have repeated many times:

As we have been since 1902, the Bancroft Family remains resolute in its commitment to preserve and protect the editorial independence and integrity of The Wall Street Journal…

I believe them. At this point, though, there’s really only one way to do that.

Now is the last chance for the Bancrofts to step up to the responsibility that comes with their extraordinary, accidental and lucrative birthright. This is the moment those Class B shares were created for in the first place. Or is the idea that privilege comes with responsibility another one of those conservative “principles,” like smaller government, say, that gets jettisoned at feeding time? Maybe it’s as antique as the idea of an independent, fair and fearless financial watchdog. We’ll see.

After the “no” vote, changes must be made, of course. As Ottaway has said, “damage has been done.”

Zannino and the board must step down, having conceded with this deal that they are unable to successfully manage the company.

And at least questions should be asked about whether the three editors who accepted guaranteed jobs under the editorial side agreement, in an effort to help mitigate the consequences of a deal, helped pave the way for one.

And the Bancrofts would need to sell their shares (at a price far below $60, I’m afraid) to a creative and patient investor who doesn’t need income now. That would be a final, and gracious, act of stewardship.

1. An excellent WSJ graphic on the family is available here.

2. Take and Give: Condemnation Is Used To Hand One Business Property of Another —- Tactic by Local Governments Seeking Jobs and Taxes Is Protested as Unfair —- BMW Yes, Mitsubishi No

December 2, 1998
The Wall Street Journal

3. Dow Jones sold its Telerate business to Bridge Information Systems Inc. in 1998 at a loss of more than $1 billion, then wrote down an equity stake in Bridge, which filed for bankruptcy in 2001.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.